Gold notches weekly gain, ends at four-week high

Prices rally as Dec. payrolls disappoint; silver leads gains, up 2.7% on day

WilliamL. Watts

SAN FRANCISCO (MarketWatch) — December U.S. nonfarm payrolls came in far below expectations on Friday, boosting gold’s investment appeal and lifting prices for the precious metal to their highest close in four weeks.

The disappointing jobs data cast doubt on the strength of the economic recovery and on how quickly the Federal Reserve will move to further slow its flow of monetary stimulus.

Bloomberg

Gold for February delivery
US:GCG4
added $17.50, or 1.4%, to settle at $1,246.90 an ounce on the Comex division of the New York Mercantile Exchange. Prices saw their highest settlement since Dec. 11 and gained 0.7% for the week, according to FactSet data tracking the most-active contracts.

March silver
US:SIH4
tacked on 54 cents, or 2.7%, to $20.22 an ounce. Friday’s gain allowed prices to finish the with week with a gain of just under 0.1%.

The U.S. nonfarm payroll data seemed “out of whack,” said Naeem Aslam, chief market analyst at AvaTrade. “Given that we had a strong reading of other economic data released this week, it is really difficult to believe in [these numbers] and this is what investors are finding difficult to get their head around.”

The Labor Department said the economy added just 74,000 jobs in December, the smallest rise since the beginning of 2011 and well below the consensus forecast for a gain of 193,000 jobs. The unemployment rate fell to 6.7% from 7%, but the decline appears to be mainly the result of people dropping out of the work force.

Data from Automatic Data Processing Inc. released Wednesday, however, had shown that private-sector employes added the most jobs in more than a year in December.

Following Friday’s data, newly confirmed Federal Reserve Chief Janet Yellen “will have a difficult decision on her hands when it comes to further tapering of the central bank’s bond-buying program, said Aslam.

The Federal Reserve in December said it would begin reducing the size of its bond purchases, the centerpiece of its quantitative-easing strategy, this month. Gold prices dropped 28% last year as momentum built toward an expected tapering of the Fed’s bond purchases. The yellow metal had initially soared in the wake of the financial crisis as the Fed undertook quantitative easing, fostering fears of inflation that never materialized.

“The U.S. Fed has also acted too soon. While it is true that the U.S. economy has stabilized, it is also true that the reason it has stabilized is because the U.S. Fed has provided a great amount of liquidity to the market,” said Douglas Borthwick, managing director of Chapdelaine Foreign Exchange, in a note. “The U.S. Fed has been the crutch helping the U.S. economy recover. As the crutch is taken away, the U.S. economy is likely to suffer.”

And downbeat news on the economy tends to lift gold’s investment appeal. Aslam said it is very likely for gold to take out its resistance level of $1,250 early next week, but “we need to see it breaking the $1,300 mark before we can have any further confidence in this trend.”

On Thursday, gold prices scored their first gain in four sessions as traders shrugged off some upbeat economic news. Weekly initial jobless claims dropped by 15,000 to 330,000, a five-week low.

On Comex Friday, platinum for April delivery
US:PLJ4
rose $17, or 1.2%, to $1,436.90 an ounce — 1.6% higher for the week, while March palladium
US:PAH4
gained $9.55, or 1.3%, to $746.05 an ounce, tacking on roughly 2% from last Friday’s close.

High-grade copper for March delivery
US:HGH4
rose 4 cents, or 1.3%, to $3.34 a pound, with prices down about half of one percent from a week ago.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.